Arch Coal Debt Fight Heats Up as Group Said to Hire Adviser

A battle among Arch Coal Inc. creditors is intensifying as the miner prepares for a potential bankruptcy filing.

A group of middle-tier bondholders hired law firm Brown Rudnick LLP to help protect their investments as the miner moves toward restructuring its $5.1 billion of debt in court proceedings, according to a person with knowledge of the matter. The creditors hold the miner’s $350 million of 8 percent second-lien bonds, which stand behind investors that hold $1.9 billion of first-lien loans, said the person, who asked not to be named because the discussions are private.

The hiring comes after Arch, the largest coal miner in the U.S. by volume after Peabody Energy Corp., said in a filing earlier this month that it was in talks with creditors on a “significant restructuring” of its balance sheet and it may file for Chapter 11 protection regardless of whether it strikes a deal with creditors. 

Matthew Weaver at Brown Rudnick declined to comment. Logan Bonacorsi, a spokeswoman at St. Louis-based Arch, didn’t respond to e-mail requests seeking comment.

Aborted Exchange

The miner’s second-lien bonds last traded at 4.75 cents on the dollar on Nov. 16, losing 50.75 cents this year, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Arch Coal had sought to restructure its borrowings outside of court, agreeing earlier this year with a majority of its lowest-ranking bondholders on a debt exchange that would have cut its burden. The deal was blocked by the first-lien lenders, who were concerned the swap would have diluted their claims on the company’s assets.

Those senior-ranking lenders are now leading bankruptcy negotiations with the company, people with knowledge of the matter said earlier this month. The lenders, who are aligned with Oaktree Capital Group LLC, are seeking control of the company, those people said.

The miner owes about $90 million in interest payments on Dec. 15, including $14 million for the second-lien bonds. Advisers are in talks for a deal that would put the company into bankruptcy by Jan. 15, when a 30-day grace period for the payments would run out, people with knowledge of the talks said earlier this month.

The company’s shares, which plunged 93 percent this year, traded at $1.20 as of 12:52 p.m. in New York on Wednesday.

Before it's here, it's on the Bloomberg Terminal.